Archive · 25 Sep 2026
IRDAI Proposes Major Changes to Insurance Distribution Costs
India’s insurance regulator wants to change how insurance is sold.
It proposes that insurers spend less on managing and distributing policies over time.
Commissions would depend more on the type of insurance and the work needed to sell and service it.
Customers could see more information about commissions and distribution costs.
The rules would also try to prevent unwanted bundling and mis-selling.
Digital platforms such as Bima Sugam could make insurance easier to compare and buy.
Some low-cost policies might move from traditional agents to digital channels if commissions fall.
The proposals are not final, and people involved in insurance can still give feedback.
IRDAI’s consultation paper proposes phased reductions in insurers’ Expense of Management limits.
Commission limits could vary by product, channel, complexity, and selling or servicing effort.
Digital infrastructure such as Bima Sugam could become a larger part of distribution.
Customers may receive clearer commission disclosures and stronger safeguards against bundling and mis-selling.
The proposals remain under consultation, with stakeholder comments due by October 25, 2026.
- Who
- The Insurance Regulatory and Development Authority of India, insurers, brokers, intermediaries, customers, and other stakeholders.
- What
- IRDAI proposed reforms covering operating expenses, commissions, disclosures, digital distribution, and safeguards against mis-selling.
- When
- The consultation paper was released on September 23; comments are due by October 25, 2026.
- Where
- The proposals concern insurance distribution in India, including rural areas, small towns, and smaller cities.
- Why
- IRDAI aims to reduce distribution costs, improve transparency and efficiency, expand insurance access, and strengthen customer outcomes.
Potential benefits
Potential concerns
Lower distribution costs
Potential benefits
Reducing Expense of Management and linking commissions to effort could improve efficiency, broaden the risk pool, and potentially strengthen policyholder value.
Potential concerns
Lower distribution costs will not automatically reduce premiums, because results depend on how insurers and intermediaries adjust their wider costs and business models.
Commission rationalisation
Potential benefits
Effort-based commissions could reward advice, servicing, claims support, and work on complex products rather than simply premium volume.
Potential concerns
Lower commissions could make low-ticket products such as personal accident and home insurance less attractive to traditional intermediaries.
Digital distribution
Potential benefits
Bima Sugam and other digital infrastructure could make insurance easier to compare, buy, service, and port while reducing distribution costs.
Potential concerns
A faster shift toward digital platforms could challenge traditional intermediaries and requires insurers to account for structural cost differences, particularly among smaller insurers.
- Consultation paper
- Recalibrating Economics of Insurance Distribution
- Life insurance EoM target
- 15% within two years and 12.5% within five years, linked to Gross Direct Premium Income
- General insurance EoM target
- A proposed move from 30% of Gross Written Premium to 20% of domestic Gross Direct Premium Income over five years
- Commission approach
- Limits would reflect insurance segment, business line, channel, product complexity, and selling and servicing effort
- Digital infrastructure
- Market Infrastructure Institutions, including Bima Sugam, are proposed as digital, pull-based distribution alternatives
- Customer protections
- Proposals include commission disclosures, suitability documentation, anti-bundling safeguards, and restrictions on volume- or reward-linked incentives for bank and NBFC staff
- Consultation deadline
- October 25, 2026